March 2018

Country Exemptions

On March 22, 2018, the President issued new Proclamations temporarily exempting imports from certain countries from the steel and aluminum tariffs that were announced in Proclamations 9704 and 9705 of March 8, 2018. The President had previously exempted imports from Canada and Mexico and the new Proclamations add exemptions for imports from Argentina, Australia, Brazil, European Union member countries, and South Korea. However, the Proclamations make clear that the exemptions, including the exemptions for Canada and Mexico, are temporary and that tariffs will go into effect on imports from an exempted country on May 1, 2018 unless the country has reached an agreement with the United States on an alternative means to remove the threat to national security posed by imports of steel articles from the country. If any agreements are reached and any countries are exempted on a long term basis, the President will consider adjustments to the tariff level imposed on non-exempt countries.

In the meantime, the President may consider quotas on imports from exempt countries. If a quota is imposed, the quota amount imposed will take into account all imports of steel and aluminum since January 1, 2018.

While the country exemptions may extend beyond May 1, depending on the progress on trade negotiations, there is no guarantee of such extensions.

On March 22, 2018, the President issued a Presidential Memorandum in which he announced the actions the United States will take in response to China’s allegedly unfair trade practices found by the Office of the United States Trade Representative (USTR) in its Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation. The actions are as follows:

On Monday March 19, 2018, the Department of Commerce published its interim rule for the submission of exclusions requests for Section 232 tariffs announced by the White House on March 8, 2018.

The rules published by Commerce are interim rules and comments on the rules must be received by Commerce no later than May 18, 2018. Meanwhile, the rules announced will be in effect.

U.S. importers and users now will need to manage to understand, navigate, and plan, based upon the onerous task of requesting exclusions. There are two different exclusion processes, which are distinct: (1) country exclusions which are handled by the United States Trade Representatives (USTR) office; and (2) product specific exclusions which will be handled by Commerce.

The recent announcement by the White House that it intends to unilaterally impose 25 percent tariffs on steel imports and 10 percent tariffs on aluminum imports from all countries except Canada and Mexico has created significant uncertainty among foreign exporters.

It is of great import that Canada and Mexico are excluded from the imposition of section 232 duties for the time being. The European Union, Australia and South Korea have expressed a desire for similar exclusions to be applied to them. In fact, the EU and Australia are almost assured of an exemption based upon press reports. But where does that leave other important allies such as Turkey, India, Brazil and a host of other steel-exporting nations?

On March 15, 2018 the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) exercised its authority to issue cyber sanctions under Executive Order 13694 and the new Countering America’s Adversaries Through Sanctions Act (CAATSA) by imposing blocking sanctions against 5 Russian entities and 19 Russian individuals connected to previous Russian cyber operations directed towards the United States. In an accompanying press release, OFAC stated that these sanctions were intended to counter Russian destabilizing activities such as interference in the 2016 US election, the 2017 global NotPetya cyber-attack and other cyber-attacks directed at critical U.S. infrastructure sectors. One aspect of this move was somewhat puzzling, because 9 of the total 24 sanctioned entities and individuals were already subject to blocking sanctions for their previous activities. For those 9 sanctioned entities and individuals, (which include Russia’s Federal Security Service (the FSB) and Main Intelligence Directorate (the GRU), whose initial designation we covered here), it is unclear what OFAC seeks to accomplish by imposing blocking sanctions against them for a second time.

Scope of the Investigation

The merchandise covered by this investigation is Laminated woven sacks or bags consisting of one or more plies of fabric consisting of woven polypropylene strip and/or woven polyethylene strip, regardless of the width of the strip; with or without an extrusion coating of polypropylene and/or polyethylene on one or both sides of the fabric; laminated by any method either to an exterior ply of plastic film such as biaxiallyoriented polypropylene (“BOPP”) or to an exterior ply of paper that is suitable for high-quality print graphics (i.e., it has an ISO brightness of 82 or higher and a Sheffield Smoothness of 250 or less); printed; displaying, containing, or comprising three or more colors, regardless of the type of printing process used; with or without lining; whether finished or unfinished; whether or not closed on one end; whether or not in roll form (including, but not limited to, sheets, lay-flat tubing, and sleeves); with or without handles; with or without special closing features; not exceeding one kilogram in weight. Laminated woven sacks subject to the scope are typically used for retail packaging of consumer goods such as pet foods and bird seed. Laminated woven sacks produced in Vietnam are subject to the scope regardless of the country of origin of the fabric used to make the sack.

President Trump announced on Thursday, March 1, that he will impose tariffs on imports of certain steel and aluminum products. We anticipate the President will formally sign the trade measures announced today next week and that they will include an additional tariff of 25% on imports of steel products and 10% on imports of aluminum products covered under the proclamation.